FAMILY TAKAFUL IN ASIA:

Mohammad Azmatullah Sharif,

FSA, FPSA

Head of Pricing & Takaful, GCC Region Life, Munich Re Underwrting Agents (DIFC), Limited

Agenda
1. Some basics of takaful and retakaful 2. Markets we will study: GCC, SA and SEA 3. Current situation of the Family Takaful market 4. What do the Statistics tell us 5. Common Family Takaful Products 6. Challenges 7. Prospects and Growth Opportunities

Basic of Takaful and Retakaful

Takaful, Arabic word, meaning "guaranteeing each other"

Islamic Insurance system is a mechanism through which participants donate part or all of their contributions which are used to pay claims for loss suffered by some participants

Mechanism of mutual help and solidarity, based on a system of Pooling

Basic of Takaful and Retakaful

Wakala Model

Mudaraba Model

Hybrid Model

Retakaful: in very simple terms Takaful for the Takaful Operators

Markets: GCC, South Asia and SEA

Current Situation of the Takaful Market

Comparison of Family Takaful Contributions across regions and years

Source: Milliman Summary of the global family takaful report 2011

What do Statistics tell us

32%

What do Statistics tell us

A L,000,000,000,000,000,000,000,000,000,000,T

2.5 Trillion

32%

0.09%

What do Statistics tell us

And what do we get after knowing all of the Stats More confused

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Common Family Takaful Products

GCC
Common Products Credit Life Group Life Individual Life Critical Illness Savings Related Distribution Channels Brokers Company Employees Sales Agents Banks

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Common Family Takaful Products

South Asia
Common Products Individual Life Group Life Savings Related Critical Illness Credit Life Distribution Channels Sales Agents Bancassurance Company Employees Brokers

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Common Family Takaful Products

South East Asia

Common Products Individual Life Critical Illness Savings Related Credit Life Group Life Distribution Channels Sales Agents Bancassurance Company Employees Brokers Internet

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HAJJ PRODUCT

Hajj Product Pru BSN Ummah (Malaysia)

Supplementary savings and protection plan for the Hajj / Umrah

Hajj Product Pru BSN Ummah (Malaysia)

Death and Total & Permanent Disability Double benefit if on Hajj or Umrah RM 2,000 (~ AED 2,400) compassionate benefit Badal Hajj If claimed then policy will pay nominated party to perform Badal Hajj RM 3,000 (~ AED 3,600) paid to nominee or Tabung Haji Travel & Services to perform for you Critical Illness Accelerated rider cover Waiver of contribution 36 illnesses covered

JUMPING JUVENILE

Jumping Juvenile

Jumping: Face amount increases x times (5, 10 times) at age y (18, 21) Juvenile: Issued to children aged 0 14 Whole life plan with cash surrender values Level premium Build up early cash surrender value due to overpayment for the adult period Can be lifetime pay or limited pay (age 65) Guaranteed coverage increase with no underwriting Face amounts in order of AED 100,000 to AED 175,000 depending on jump level

Jumping Juvenile

Jump features are locked into product design 5 or 10 times increase At age 18, 21, 25 Not chosen by the policy owner Fully Underwritten plan Look at longer term risks, family history, etc.

HIGH NET WORTH PRODUCT PREFERRED UNDERWRITING

What is Preferred Insurance?

Initially preferred insurance was distinguished by: Tobacco or non-tobacco use Four classes: Male Preferred (i.e. non-tobacco use) or called Male Non-Smoker Female Preferred or Female Non-Smoker Male Standard or Male Smoker Female Standard or Female Smoker Plus an sub-standard rating class applicable Easy to split insureds into smoker / non-smoker classification Easy for consumer and producers to understand and sell

Product Design

Product Type: Works best for products where the mortality premium is a large portion of the premium cost e.g. Term insurance, Bundled vs. unbundled products Classes: If have 2 non-smoker classes and 1 smoker class, this is: 6 underwriting classes (male / female split) Face Amount: Minimum face amount should be tied to when full underwriting requirements come into effect USD $175,000 - $300,000 depending on issue age Stricter underwriting requirements

Takaful basics Takaful challenges

Takaful operators are faced with numerous challenges in an competitive environment

Significant set-up costs

Additional Sharia compliance costs

Evolving regulations

Lack of Islamic investments

Low takaful awareness

Limited distribution channels

Lower RoE

Lower investments returns

Lack of takaful talents

Reluctance of buyers & brokers to shift to takaful

Top-line driven market strategy

etc, etc,. .

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Market challenges: Practical View

Group Market: high FCL and NML demands Unsustainable prices and terms Lack of Life Insurance awareness amongst operators Distributors driving (or trying to) the market Non unified regulations No standard mortality tables No minimum pricing basis

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Takaful Prospects and Opportunities for Growth

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Takaful Prospects and Opportunities for Growth

Life Insurance and Family Takaful Penetration is very low in the region Takaful and Retakaful Operators need to work together Design and introduce products suitable to the region Simple products Small Sum Covers Simplified or no underwriting Simple rate structure unit or age banded Product ideas from other markets for a specific target market Marketing strategies Internet, TV/Radio, Stands in the Malls etc

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Takaful Prospects and Opportunities for Growth

Sharia Boards of retakaful operators work together:
Sharia Committees of Munich Re, Swiss Re and Hannover Re met in 2010 in Dubai to agree on general retakaful principles to facilitate global harmonisation.

Strong Regulatory Regime to support the growth of Takaful and Retakaful

Takaful Pools, pricing, reserving, sales practices should be regulated Eg: Malaysia

Standard Policy/Treaty Conditions wrt Takaful

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Recap

The nature of takaful: risk sharing v risk transfer Retakaful: the Takaful for the Takaful Operators The region provides many opportunities for takaful to grow There are many challenges to overcome All the stake holders need to work together to make it a success

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Wishing you a successful Takaful

THANK YOU VERY MUCH FOR YOUR ATTENTION

Mohammad Azmatullah Sharif, FSA, FPSA Head of Pricing and Takaful, Life - GCC asharif@munichre.com

2009 Mnchener Rckversicherungs-Gesellschaft 2009 Munich Reinsurance Company

Disclaimer

Munich Re Group is not a legal, tax or accounting advisor and makes no representations as to the accuracy of any data or information gathered or prepared by Munich Re Group or advisors hereunder. Your company should therefore consult with its own tax, legal or other advisors and make its own independent analysis and investigation of the proposed transaction, as well as the financial, legal, accounting and tax consequences thereof, the creditworthiness of the parties involved and all other matters to the transaction prior to its own independent decision whether or not to enter into any agreements in connection with the transaction. This analysis and proposal contains indicative terms for discussion purposes only. Munich Re Group gives no assurance that any transaction will be consummated on the basis of these indicative terms and no specific issuer is obliged to issue any security or instrument on such indicative terms. This proposal does not constitute an offer to sell or any solicitation of any offer to buy or sell any security or instrument or to enter into any transaction on such indicative terms. The data and analysis does not assure that securities can be issued at certain terms and conditions. All terms and conditions are subject to a mutually agreed engagement letter. This proposal is not intended to provide the sole basis for any evaluation by you of the transaction, security or instrument described herein and you agree that the merits or suitability of any such transaction, security or instrument to your particular situation will be independently determined by you including consideration of the legal, tax accounting, regulatory, financial and other related aspects thereof. In particular, Munich Re Group owes no duty to you to exercise any judgement on your behalf as to the merits or suitability of any transaction, security or instrument. The information contained herein is provided to you on a strictly confidential basis and you agree that it may not be copied, reproduced or otherwise distributed by you (other than to your professional advisors) without prior written consent. Munich Re Underwriting Agents (DIFC) Ltd are Authorized and Regulated by the Dubai Financial Services Authority.

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Data Sources

ERNST & YOUNG: The World Takaful Report 2012 Swiss Re Sigma: 2009 Milliman: The First Global Family Takaful Report 2009

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